Saturday, March 13, 2010

CPSIA - The New Waxman Amendment Analyzed

On Friday, House Democrats began to circulate a discussion draft of a new amendment to the CPSIA. This draft follows the abortive effort by Chairman Henry Waxman of the House Committee on Energy and Commerce to slip a CPSIA amendment to his own liking into omnibus legislation last December. [That effort was disclosed and discussed in this space from December 11-16, 2009.] The crash-and-burn of the first Waxman amendment created a new dynamic in CPSIA negotiations as it was the first (tacit) public acknowledgement by Waxman that the law was flawed AND that the CPSC could not fix it by itself. The failure of the secret amendment effort also showed that Mr. Waxman isn't invincible. So, a step in the right direction.

Recently, in the wake of the January 15th recommendations of the CPSC Commission, the Dems reignited the simmering discussion of CPSIA changes by engaging various stakeholders on how the first Waxman amendment could be improved. This process was constrained by the Dems' insistence that comments be in the form of changes to the first Waxman amendment, thereby eliminating anything too "blue sky". Consistent with the recent (and short-lived) post-Massachusetts Dem preference for bipartisan "cooperation", the Dems actually asked House Republicans what they thought. Let's just say the Republicans see some basic flaws in the law. . . . Anyhow, the Republicans having provided their feedback, largely rebuffed, this draft emerged.

The procedural process forward is unclear. The standard (and appropriate) process would be a hearing followed by a "mark-up". The Senate also has something to say on this legislation (their position is not clear although Senate Dems more readily acknowledge the need to fix the law). It remains to be seen whether Waxman will allow a real hearing on the CPSIA to take place. Dissenting views are not well-tolerated in this era of Congress. Anyhow, the Dems are asking stakeholders to send comments by this Friday.

I intend to discuss this proposed legislation in several essays. In this essay, I would like to discuss global issues. I will return to discuss the specifics of the law, notably the treatment of Section 101(b), in later posts.

A few thoughts, generally:

a. The amendment dodges most of the serious issues in the law. My list of changes is comprehensive, and the draft legislation avoids most of it. This amendment makes no effort to respond broadly to the well-documented flaws in the law. No one can argue anymore that the CPSC can fix these problems. The legislation reads (to me) like the position of someone almost completely in denial.

Let's face FACTS - the CPSIA was passed on August 14, 2008. It is now March 14, 2010. That's a long time. The CPSC has blown countless deadlines, and has failed to resolve MANY critical issues so far, like the phthalates test standard, the 15 month rule and so on. They are working around the clock. This thing is not going to fix itself, and the agency's future is literally at stake.

The Dems refusal to face up to these issues is a betrayal of you, your customers and your marketplace.

b. You might ask - WHY are the Dems avoiding all of these serious issues? Are they deaf?

I think the answer is that they are hardly deaf but have little interest in opposing viewpoints. The CPSIA is their legacy and as such, no amendment will be blessed by them if it admits a defect in their original thinking or their asserted Perfect Legislative Process. An "acceptable" amendment must therefore pay homage to the original law and its structure. By working within the law's original structure, the Dems ensure that the basic defects will survive amendment - and the consequences to your business, your market and to the regulators themselves will remain devastating.

[The Dems' "legacy" also survives if they can delay change long enough to make it impractical or impossible to unwind all rules and regulations implementing the misguided CPSIA. After all, we business people have no choice but to upend our businesses to follow these rules, and would incur more damaging expense to change our processes a second time. There seems little doubt that the forces behind the CPSIA want the law's infrastructure to be impossible to untangle by future Congresses or CPSC Commissions.]

The Dems' homage to the original law is evident in several places. For instance, the concept of a "low volume manufacturer" is designed to provide a very (VERY) limited opportunity to craft an exception to the original testing requirements. Even so, the language clearly states that exceptions benefiting the LVMs must still "assure certification based on compliance with the relevant consumer product safety standards." [Emphasis added.] In other words, no exception will be given to the little guys from the law's basic premise that manufacturers must prove compliance before sale. [More on LVMs later.]

The proposed rules on the so-called "functional purpose" exception also kowtows to the law's concept that everyone must ask for permission to be excused from lead requirements. In other words, the Dems reject the notion that the law can be narrowed rationally and appropriately without a burdensome bureaucratic process. Even action by the agency on its own initiative will be a major ordeal. The Dems know (because they have been told) that the exception process is effectively a closed door for all but the most well-capitalized companies. You may interpret the legislative language as the Dems' response to this small business issue.

Another good example of the Dems' sticking with the original law's structure is the use of the word "practicable" in the Section 101(b) changes. This change is the doorway for the ATV'rs and book publishers to argue for exceptions to the lead-in-substrate standards. I am told that this word was chosen because of a Supreme Court decision (that I have not read) holding that "practicable" incorporates concepts of economics. Ah, I see. In other words, this language is a way to make the law look just like the original one, but still provide a faint hope for business people that they can somehow wriggle out of ridiculous lead-in-substrate restrictions. It's obscure, to say the least, but leaves the original legislative structure in place - the Dems' principal goal.

c. The new amendment ADDS more complexity to an already blindingly complex law. I have written about complexity numerous times, and recently posted a video explaining the frustrating challenge of trying to understand this law fully. Complexity in this case does not reflect the difficulty in creating a safe market for children's products. Actually, that issue is long-resolved. The complexity stems entirely from a defective legal structure and its consequences. If the Dems insist on keeping the original CPSIA structure in place, you must get used to complexity spawning more complexity in your business life. It will only get worse.

This is what Big Government looks like. Hope you like it.

d. CRITICAL ISSUES are absent and unaddressed in this legislation. Examples:

Risk Assessment by the CPSC and/or the Commission.

Changes in age limits for the lead standards and phthalates ban.

Narrowing of the scope of "Children's Product" to eliminate many categories of products unthinkingly pulled into this law by its overly broad language.

True reform to protect small businesses.

Tracking labels relief.

And so on. As noted above, to take these steps would mean acknowledging that the original law was grossly defective. The Dems would rather eat lead-free glass than admit their career achievement was fundamentally defective. Ironically, the Republicans have no such reluctance, despite voting for the original law. The sad prospect is that unless the Dems have a change of outlook (soon), real reform may need to wait for a change in gavel (bye, bye, Mr. Waxman).